Nummi (2015)

Ira Glass

It's This American Life. I'm Ira Glass. If you're just tuning in, we're in the middle of a story about a car plant in Fremont, California called NUMMI. We now turn to the question, why was it so hard for GM to replicate NUMMI elsewhere in the company? Why didn't this idea spread decades ago?

In the first half of our story, we heard a lot from workers who were on the factory floor. In this half of the story, the action moves to their bosses-- the supervisors at GM-- who had a chance to turn the company around with what they learned at NUMMI. Again, here's NPR's Frank Langfitt.

Frank Langfitt

GM had gotten the first thing it wanted out of NUMMI-- a high quality small car. Now the question was, how could it spread the lessons of NUMMI throughout the rest of the company? To do that, it set up a special liaison office. Managers were flown in for tours and to work the assembly line for a few days to learn the team concept.

And from the beginning, GM executives sent 16 of their rising stars to help start NUMMI, with the idea that later, they'd come home and change the company. Two Wall Street Journal reporters later dubbed them the NUMMI commandos. One of the 16 was Mark Hogan. He says the top brass understood NUMMI's game changing potential, that a Toyota style plant squeezed many more cars out of far fewer workers.

Mark Hogan

If General Motors was able to take its many manufacturing facilities and implement that production system, it meant billions to General Motors in the bottom line.

Steve Bera

We were ready. We were fired, and we had the mental condition that says, we're going to do this. We're going to change the world.

Frank Langfitt

That's Steve Bera, another commando. He says once NUMMI was up and running, he and the other 15 waited to be deployed elsewhere for the next phase of their mission. But the company didn't seem to know what to do with them.

Steve Bera

Instead of coming back to the 16 of us and saying, there's some secret sauce here. What is it? How can we use this to our advantage? No one ever asked us that question.

Frank Langfitt

Why didn't they do that?

Steve Bera

It was never part of a master plan. And if there was a master plan, none of us ever saw it.

Frank Langfitt

Frustrated, Bera quit after just two years at NUMMI. With no master plan from Detroit, the first real attempt to do NUMMI again came from a factory manager, 400 miles south of Fremont, at a plant in Van Nuys. The factory was facing a possible shutdown. Its manager, a guy named Ernie Schaefer, had visited NUMMI, and he thought maybe he could save his plant if he adopted the Japanese system.

But he didn't have all the advantages Fremont had. This time, Toyota wasn't a partner in the experiment. GM had to transform Van Nuys on its own. Ernie Schaefer knew it was going to be tough.

Ernie Schaefer

The thing that I think kept us moving forward is we had no alternative. I mean, it was pretty well known that if we didn't successfully implement this philosophy in Van Nuys, we weren't going to be around.

Frank Langfitt

Van Nuys made Firebirds and Camaros, and its reputation wasn't much better than GM Fremont's had been-- defective cars coming off the line, battles with the union, sabotage. So Ernie Schaefer enlisted the same UAW leader who got the union on board at NUMMI, Bruce Lee, to help him win over the Van Nuys workforce. They shut down the plant for two weeks to train everyone in team concept and quality control.

For this workforce, there were no trips to Japan, no tearful sushi parties. And from the start, workers were skeptical.

Larry Spiegel

The lack of receptiveness to change was so deep.

Frank Langfitt

Larry Spiegel was another NUMMI commando. He moved down to Van Nuys to help launch the Japanese system there.

Larry Spiegel

There were too many people convinced that they didn't need to have to change.

Frank Langfitt

Hadn't General Motors threatened to close the plant?

Larry Spiegel

They didn't believe them.

Larry Spiegel

It's not logical. They just didn't.

Frank Langfitt

This was one of the biggest differences between Fremont and Van Nuys. Van Nuys hadn't been shut down. Turns out it's a lot easier to get workers to change if they've lost their jobs, and then you offer them back. Without that, many union members just saw the Toyota system as a threat.

And they had a point. Under the Japanese system, Van Nuys stood to lose a fourth of its workforce, because the more efficient a plant becomes, the fewer workers it needs. And just as bad, the team concept hurt their seniority rights. This had been a problem for union members back at NUMMI also.

Richard Aguilar

Your seniority is what you work for. To me, that's what a union's about. Seniority.

Frank Langfitt

Richard Aguilar worked at NUMMI, and to him, seniority was just another way of saying fairness. He waited 15 years to get enough seniority for the job he'd always wanted in the plant. Under the new system, management could just hire someone off the street for that job. The whole idea of seniority placing you into one great job for years was impossible under the team concept. Workers had to learn every job on their team and take turns doing those jobs.

Richard Aguilar

And the team concept, it sounds good. I mean, team player sounds good, but it pit worker against worker. It really does.

Frank Langfitt

This was the other thing Richard hated about the Japanese system. The whole point of a union, its most basic principle, was to protect you from management. But once people were working in teams, Richard says union members started doing things for management that just seemed wrong.

Richard Aguilar

People now snitched on each other. You know, they'd point fingers. Oh, he's not doing this job right, you know, or she's not doing the job right. And they would even keep track of stuff they'd missed, because that's what the company puts on them-- that the only way you can protect your job, you have to keep the team strong. So there's a weak link, you've got to get rid of that weak link.

And I would go tell them, you can't do that. You can't build a case for management against a union member. It made me angry and disappointed that the union had gotten so backwards that they'd forgotten what a union meant-- taking care of each other.

Frank Langfitt

At Van Nuys, it wasn't just union members who resisted the Japanese system. Managers were against it too. Like the union members, they didn't want change. There were things they liked about the old system. It gave them privileges and perks they'd now be losing.

For instance, some managers opposed the idea of stopping the assembly line, because their bonuses depended on the number of cars that rolled off the line. Never mind how many defects they had. And now that workers and managers were supposed to be a team, executives and workers would share the same cafeteria and same parking lot, as equals. Managers at NUMMI didn't have a problem with that, but the managers at Van Nuys?

Frank Langfitt

The UAW's Bruce Lee remembers getting a phone call from plant supervisor Ernie Schaefer about his managers.

Bruce Lee

They basically told Ernie, you do that and we're out of here. We're going to quit en masse. Because Ernie called me, and he said, Bruce, I can't do it. I can't do those things.

I said, just think about it. That's a nothing. So they have to walk 20 yards more. I said, isn't that foolish that some grown man would come up and tell you, I'm going to quit if I can't have this parking place right here?

Frank Langfitt

So people fought the new system from both sides. Managers gave Ernie grief, and a dissident faction sprang up in the local union, which elected a staunch opponent of the Japanese system as their chairman. And as if that all wasn't enough, Ernie Schaefer ran into another obstacle. Workers could only build cars as good as the parts they were given. At NUMMI, many of the parts came from Japan and were really good. At Van Nuys, it was totally different.

Ernie Schaefer

That was perhaps one of our biggest failures in that an isolated plant can't do this by itself.

Frank Langfitt

The team concept stressed continuous improvement. If a team got a shipment of parts that didn't fit, they'd alert their bosses, who'd then go to the suppliers to fix the problem. Sometimes they'd realize the problem was in the part's design, and Toyota engineers would go back to the drawing board and remake the part to address the problem workers were having on the assembly line. All the departments in the company worked together.

But Ernie's suppliers had never operated in a system like that. If he asked for fixes, they blew him off. And if he called Detroit and asked them to redesign a part that wasn't working, they'd ask him, why was he so special? They didn't have to change it for any other plant. Why should they change it for him?

Ernie Schaefer

You had asked the question earlier, what's different when you walk into the NUMMI plant? Well, you can see a lot of things different. But the one thing you don't see is the system that supports the NUMMI plant. I don't think at that time, anybody understood the large nature of this system.

General Motors was a kind of throw it over the wall organization. You know, each department-- we were very compartmentalized, and you'd design that vehicle, and you'd throw it over the wall to the manufacturing guys.

Frank Langfitt

And if something didn't work, or was impossible to assemble, that was their problem.

Ernie Schaefer

And they had to deal with it. And, I mean, you're in there. You've kind of put your heart and soul into making this whole team concept work. And now you're the messenger that has to go out and say, look, guys, even though this is the way the system's supposed to work, and these are my issues, I'm not going to be able to solve them, and you're going to have to deal with it.

And it was destructive. It was detrimental. I mean, no question about it.

Frank Langfitt

Schaefer says when he realized how much of the Japanese system happened off the factory floor, it answered something that had never quite made sense to him. Why had Toyota been so open with GM in showing its operations?

Ernie Schaefer

You know, they never prohibited us from walking through the plant, understanding, even asking questions of some of their key people. You know, I've often puzzled over that-- why they did that. And I think they recognized we were asking all the wrong questions.

We didn't understand this bigger picture thing. All of our questions were focused on the floor, you know? The assembly plant. What's happening on the line. That's not the real issue. The issue is, how do you support that system with all the other functions that have to take place in the organization?

Frank Langfitt

Quality at Van Nuys didn't improve, and in 1992, GM shut the plant down for good, leaving 2,600 people without jobs. This is what the NUMMI commandos were up against. Entrenched, defensive bureaucracies and workers many of the places they turned. They were not only trying to change the biggest corporation in the world. They were trying to change a corporation that had been essentially a collection of individual car companies-- Cadillac, Oldsmobile, Pontiac, Buick-- each with its own design team, own leadership, and its own way of doing things.

Dick Fuller

It's a whole new process, a whole different process, than the one they had grown up with. And it was a huge threat.

Frank Langfitt

Dick Fuller was another commando. He ran the information technology division at NUMMI, which used some of the same streamlining concepts employed on the factory floor. He says when GM managers visited NUMMI, instead of trying to figure out how they could benefit from the system, some of them attacked it. Fuller remembers one IT manager who visited from a plant on the East Coast.

Dick Fuller

And when he came back, he wrote a report, which, if I put a title on it, would say, won't work here. And I think part of that was a threat to him. It was a threat to him to see that it was working so well.

Frank Langfitt

Do you think this guy looked at this and said, well, if this works here, and they try to spread it, I'll lose my job?

Dick Fuller

Well, I don't think he was going to lose his job, but he'd probably have to give up half his staff, you know? So that's power. It's people that's power in General Motors.

Frank Langfitt

Getting all these mini empires to embrace the kinds of radical changes that happened at NUMMI would have taken an almost Stalinesque leadership from above-- a combination of charisma and fury in the corner office. And NUMMI commando Mark Hogan says no one at GM fit that bill.

Mark Hogan

I was very convinced that we had to change, and we had to change rapidly. And I think all of us that were NUMMI alums, so to speak, were frustrated at the lack of urgency.

Frank Langfitt

Did you have those kinds of conversations with people in the '80s back in Detroit?

Frank Langfitt

What would people say to you?

Mark Hogan

Yeah. I think there still wasn't a recognition that the formidability of the competition, particularly from Toyota-- I think a lot of people were in denial, or just not willing to recognize it. And even though GM had gone from 50% market share in the early '70s to mid-30s, it was gradual over time, and there wasn't the sense of reaction or urgency that other companies that lost that much market share might have felt.

Frank Langfitt

Those exact numbers? GM went from 47% of the US market in the mid-1970s to 35% a decade later. One reason car execs were in denial was Detroit's insular culture. Yes, unions and management were always at each other's throats, and yes, GM and its suppliers had a destructive relationship that seemed to almost discourage quality. But everyone had settled into comfortable roles in this dysfunctional system and learned to live with it. And in the late 1980s, with their market share in freefall, Jeffrey Liker says they were more apt to blame others than themselves.

Jeffrey Liker

I worked with all the big three, at the time, automakers, and it was common in all three automakers. They all believed that if the consumers think we have quality problems, it's because Consumer Reports is misleading them, and they're biased toward Toyota. They all believed that Consumer Reports was against them-- that there was somewhat of a myth of Japanese quality.

Frank Langfitt

If all of that wasn't enough to stymie attempts to learn from NUMMI, GM was distracted by other projects-- massive projects. It bought Ross Perot's company, Electronic Data Systems. It bought Hughes Aircraft for $5 billion. It decided the future was robotics. It decided the future was a massive, costly reorganization. It started Saturn, which produced cars that were better marketed than they were built.

Then came the 1991 recession. Car sales slumped. Again, Mark Hogan.

Mark Hogan

It was really its first significant wake up call. GM, unfortunately, had a massive loss in 1992. General Motors lost more than $20 billion. So I think at that point in time, there was a complete rethinking of the way we ran the company-- that things had to change, and they had to change fast.

Frank Langfitt

It was the largest loss in American corporate history to that time-- $23.5 billion. GM's board of directors responded with what the press called a boardroom bloodbath, purging a long list of managers. Jack Smith took over as CEO. He was the executive who led the negotiations with Toyota to create NUMMI.

He saw NUMMI as a way forward for GM. Mark Hogan and some of the other commandos felt they finally had a champion.

Mark Hogan

Jack Smith was installed, and started to rapidly implement the Toyota production system into General Motors.

Frank Langfitt

Rapidly by GM standards, which wasn't nearly rapidly enough. Jack Smith declined to talk to me for this story, but he told a reporter a few years ago, "I just wish it had happened a lot faster than it did." Pick your nautical cliche. Reforming General Motors was like turning around a battleship, one manager said. Another compared it to steering the Titanic with a canoe paddle. Jeffrey Liker says the cultural gap between NUMMI and the rest of GM was so vast that even with clear marching orders to change, some of the people running the company didn't know where to begin.

Jeffrey Liker

There was no vocabulary, even, to explain it. I remember one of the GM managers was ordered from a very senior level-- it came from a vice president-- to make a GM plant look like NUMMI. And he said, I want you to go there with cameras and take a picture of every square inch. And whatever you take a picture of, I want it to look like that in our plant. There should be no excuse for why we're different than NUMMI, why our quality is lower, why our productivity isn't as high, because you're going to copy everything you see.

Immediately, this guy knew that was crazy. We can't copy employee motivation. We can't copy good relationships between the union and management. That's not something you can copy, and you can't even take a photograph of it.

Frank Langfitt

The first round of changes put andon cords and Japanese-style inventory control into the GM plants, but there was no change in the culture. Workers and managers continued their old antagonistic ways. In some of the factories where they installed the andon cord, workers got yelled at when they pulled it. A few plants even cut the cords down.

So the second round of changes included some team concepts. They put together a book explaining how each plant should run and the reasoning behind it. Jeff Weller was one of the people dispatched in the 1990s to convert the company plant by plant. Weller says some factory managers were receptive, but in the sprawling, decentralized system, the plant manager was still king, and ran the factory the way he wanted.

Jeff Weller

We had some tough goes in some of our facilities, where we spent more time trying to convince the plant leadership versus actually going on and doing the implementation. I would say, I was asked in one plant to leave, because they were not interested in what I had to sell.

Frank Langfitt

How did he actually ask you to leave? What did he say?

Jeff Weller

We're finished, and you can leave.

Frank Langfitt

And what did you do?

Jeff Weller

I left, because, you know, I was in his home, so to speak. His territory. His plant.

Frank Langfitt

Now, whatever happened to that plant manager who asked you to leave?

Jeff Weller

That plant manager eventually retired.

Frank Langfitt

This may sound like a naive question, but why didn't the CEO pick up the phone and say, you're fired?

Jeff Weller

Well, it's a big company, and I'm not sure that, you know-- it doesn't work that way.

Frank Langfitt

Lots of people in GM still didn't see the need to change. By the late 1990s, the company was posting huge profits selling trucks and SUVs, which made the loss in market share seem less urgent. To make real progress, managers had to leave the United States. One overhauled GM Germany.

Mark Hogan took over GM Brazil in 1994 to enact NUMMI principles there. In Brazil, he had a big, unionized workforce, but he could avoid GM's bureaucracy, its supplier network, and the United Auto Workers.

Frank Langfitt

How long did it take you to implement the lessons of NUMMI in Brazil?

Mark Hogan

It took us about 18 to 24 months, which at the time, I was quite impatient about. I mean, I wanted it faster.

Frank Langfitt

And what did that mean for the bottom line for GM?

Mark Hogan

Well, in that time frame, particularly '94 through '97, GM Brazil was one of the most profitable entities within GM.

Frank Langfitt

But in America, everyone I talked to said it took about a decade and a half after NUMMI for change to even begin to take hold at GM. By the year 2000, GM finally started to see a generational transformation. Jeffrey Liker says so many managers had come through NUMMI for training for a day or a week or a year.

Jeffrey Liker

Over time, you start to get 10 people, 20 people, 100 people, 300 people. And you now have a critical mass of people in GM who've all been in NUMMI. They've lived it. Now they're managing people and teaching them what they learned. And it snowballs, and suddenly, the world is different at GM, and nobody can even tell you exactly why.

Frank Langfitt

By the early 2000s, GM had developed a production model with the UAW based on Japanese principles that would go into all of its plants. It was called the Global Manufacturing System. And although GM quality still lags behind the imports, it's improved a lot. Again, Jeffrey Liker.

Jeffrey Liker

If you look carefully at the quality of a GM product, and you look with a fine tooth comb, with a magnifying glass, you're going to see a level of quality that you didn't see 15 years ago.

Frank Langfitt

You want to show me for a sec? Do you mind? There's one right here.

Jeffrey Liker

And if we look down here, it looks really good, right? The gap is about the same between the front and the back door. The surface is very smooth and very uniform.

Frank Langfitt

And 15 years ago, what would that have looked like?

Jeffrey Liker

You would see maybe at the top, it would be more narrow than at the bottom. If you look inside the car, and you open the glove box, it falls very gradually down the way it's supposed to. You close it-- I barely have to touch it, and it closes tightly.

Frank Langfitt

Precision in all these details makes for a better-looking, more reliable car, where things work like they're supposed to. But this improvement didn't come soon enough. Some cars and some plants improved less quickly than others. And while GM was getting better, so were its competitors, leaving it still near the back of the pack.

James Womack

Well, one of the ironies of GM was that in the moment it went bankrupt, it was probably a better company than it had ever been.

Frank Langfitt

That's James Womack, co-author of a seminal book comparing the Toyota and GM production systems, The Machine That Changed the World.

James Womack

In the factories, they had really dramatically closed the productivity gap that they had had for many, many years. And on the new products, they have much better quality. So the company that failed was actually doing better than it had ever done. But it was too late, and that's really sort of hard to forgive-- that if you take 30 years to figure it out, chances are you're going to get run over. And they got run over.

Frank Langfitt

In the end, what did them in was the 2008 recession. It destroyed the car market. The next year, General Motors became the largest industrial bankruptcy in US history. Its bailout cost taxpayers more than $50 billion. I asked Mark Hogan, the NUMMI commando who went on to run GM's small car division in North America, if GM had adopted NUMMI earlier, could it have really changed all that?

Mark Hogan

Definitely. I think if General Motors had moved in the late '80s to implement the system across the board, it may very well have saved GM from going into bankruptcy.

Frank Langfitt

Explain that.

Mark Hogan

Well, I just think the productivity and the quality changes that come with that would have been so profound that this ever increasing loss of market share would have been stopped.

Bruce Lee

Well, I think they'd have been building a higher quality product.

Frank Langfitt

Again, the UAW's Bruce Lee.

Bruce Lee

You know, they sold junk for a while. Just any kind of piece of crap they could roll out there, they did. And they paid a tremendous price for it. And even when they turned the corner in quality, people didn't trust them.

They'd say, well, gee, they're building a good car now. Why aren't they buying them? Because they don't trust them. But had they adopted and embraced the team concept in an honest way, they were going to do this, I think it might have dramatically changed what happened in the American auto industry. There's no question in my mind.

Frank Langfitt

Of course, quality and reliability weren't the only problems that brought GM down. Executives made other big mistakes. Over the years, General Motors negotiated contracts with the UAW with such generous health care coverage that by 2007, it amounted to more than $1,600 for each vehicle GM produced in North America. And initially, some GM executives dismissed hybrid cars like the Prius as a publicity stunt. Instead, they bet the company on SUVs and trucks, only to see sales crash when gas hit $4.00 a gallon.

Over the last decade, as GM became more like Toyota, Toyota became a little bit like GM. In 2008, it took over the title from GM of the world's largest automaker. But Toyota executives now say the company did this by making one of GM's old mistakes-- stressing quantity over quality.

Akio Toyoda is the company CEO. He's the grandson of the founder, and cut his teeth at NUMMI. At a congressional hearing in 2010 about Toyota's sudden acceleration problems, he said the company's fatal mistake was growing too fast.

Akio Toyoda

We pursued growth over the speed at which we are able to develop our people and our organization, and I am deeply sorry for any accident that Toyota drivers have experienced.

Frank Langfitt

It was 15 years before GM took the lessons of NUMMI seriously, and it spent the next 10 years slowly implementing what it learned. And all the time, the NUMMI plant kept pumping out vehicles-- 6,000 a week on average, two shifts a day. Toyota got what it wanted out of the deal. A year after starting NUMMI, it began opening other factories around the US, using what it had learned in Fremont.

GM and Toyota continued to run NUMMI together until 2009, when GM went bankrupt and pulled out, leaving Toyota to run the plant alone. Toyota decided to shut the factory down. It was their only unionized plant in the United States.

In April 2010, NUMMI produced its very last car-- a Corolla. 4,500 people lost their jobs. This is the first factory Toyota has shut down since it was founded 73 years ago.

John Shook

Toyota's not perfect. GM is not perfect. But I think anyone who touched NUMMI will never forget it.

Frank Langfitt

One last time, that's John Shook, the first American Toyota hired for NUMMI.

John Shook

It does represent something that was special at a point in time. It was a laboratory. My learning curve-- it wasn't just a curve. It was a 90 degree right angle. I loved every minute of it. And almost everyone I think you'll talk to who worked on NUMMI will say the same thing.

Rick Madrid

I'm so fortunate that I ended my career in the auto industry at NUMMI.

Frank Langfitt

Rick Madrid retired from the assembly line in 1992.

Rick Madrid

I just hate to see the plant close. Oh, that just hurts me. End of an era. It changed my life from being depressed, bored, and like my son said, changed my attitude. It changed me all for the better. I really hate to see it go.

Billy Haggerty

I look at cars, and I see a lot of the cars that we built.

Frank Langfitt

That's Billy Haggerty, who ended up putting in 18 years at NUMMI without a vacation day. He says just the other day he saw one.

Billy Haggerty

But I just seen-- what was it? An '86, '87 Corolla pull in right around the corner here. I was heading for the bank. And I just looked at it and said, boy, that one's old. And I looked down, and it was a Corolla.

I know we built it right there. So it's still running. It's still kicking. It feels good.

Frank Langfitt

This is also NUMMI's legacy. In the end, it's not just a symbol for so many things that went wrong with GM. It's also a really good car plant. One that turned out nearly 8 million high-quality cars and trucks.

Ira Glass

Frank Langfitt. When we first ran this story back in 2010, Frank was NPR's automotive correspondent. He's now their international correspondent based in Shanghai. Since 2010, the NUMMI plant in Fremont has become symbolic of what's happening in the American car industry in a different way. It's now where they make the Tesla.

[MUSIC - "TOYOTA COROLLA," THE TURN UPS]